4-Foreign Investment Mechanism in the I.R.Iran

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Generally there are different ways a foreign investor can invest in Iran. The three main schemes are as follows:

– Investment under the Foreign Investment Promotion and Protection Act (FIPPA)
– Investment in the Iranian mainland without the protection of FIPPA
– Investment in or via Free Trade Zones

Due to its importance, we start to describe the very first scheme:

The first legal framework for foreign investment in Iran was defined under the law for the Attraction and Protection of Foreign Investments (LAPFI) in 1955. This legal regime was in effect up to May 2002, when the new foreign investment law entitled the Foreign Investment Promotion and Protection Act  (FIPPA) became effective.
The legal corpus governing foreign investments in Iran constitutes the FIPPA, its implementing regulations as well as legislation applicable for the establishment and conduct of economic activities in the country.

Even though FIPPA has the main ingredients of LAPFI, but some specific enhancements and features of FIPPA can be outlined as follows:

– Broader fields for involvement by foreign investors including in major infrastructure
– Recognition of new modes of foreign capital exposure in addition to Foreign Direct Investment (FDI), e.g. project financing, buy-back arrangements, BOT and civil (unincorporated) partnerships
– Introduction of new legal options governing the government-investor relations
– Under FIPPA, foreign capital is defined in a very broad and diversified  manner: be it in cash or in-   Kind, such as machinery and equipment, raw materials, parts, specialized services as well as intellectual property
– No restriction of whatever nature is imposed on the manner, type and volume of investment,
percentage of shareholding, profit and capital repatriation as well as internal relations between the
parties to an investment project
– FIPPA provides full security against the risks which are generally referred to as non-commercial  risks.
Repatriation of the principal capital, dividend and capital gain, compensation in case of expropriation or nationalization and compensation in case of business disruption by the government are fully
guaranteed
– There should be no discrimination vis-à-vis foreign investors and all facilities, privileges, exemptions and any accord to local investors will be equally extended to foreign investors
– The” most favored nations treatment” may be applicable to the investors of countries with which the Iranian government has entered into a Bilateral Investment Treaty (BIT). Currently 41 BIT agreements have been signed with most of the European, South-East Asian, Middle Eastern and North and South African countries

Any investments will be handled through the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), which was founded in June 1975 and constitutes the foreign investment authority of Iran. The head of this body is the vice minister for investments and international affairs of the ministry of economic affairs and finance. The functions of the organization range from investment to financing as well as from bilateral to regional and international relations.